The “Turning Point” Week for Base Metal Prices: As Diplomacy Cools, Monetary Policy Eases, and Prices Seek a New Equilibrium

The past week in the metal markets. From copper, aluminum, zinc, to lead and iron ore—witnessed a chain reaction: unexpected diplomatic news between Washington and Beijing mitigated trade anxieties, while the decision to ease monetary policy in Washington shifted risk assessment and the cost of capital. The result was sharp, short-term price jumps, technical buying and selling flows, and a reminder that while sentiment can create major waves, sustainable momentum still requires “material confirmation“, meaning actual demand and supply developments. This article summarizes the price movements over the past week, explains the underlying mechanisms, features the voices of leading experts, and outlines a monitoring scenario for producers, traders, and investors.

The Historic Meeting, a “Soothing” Potion for the Market

The most reassuring news of the week was the face-to-face meeting between President Donald Trump and Chairman Xi Jinping on the sidelines of the Busan conferences. This development was received by the market as a significant de-escalation in the trade relationship between the world’s two largest economies: initial announcements suggested the two sides discussed specific concessions (purchasing agricultural products, maintaining the flow of strategic minerals), laying the groundwork for hopes of reduced trade uncertainty that has weighed on supply chains for months. Comments from analysts suggested this was an “effort to reset the narrative” between the US and China, a move sufficient to trigger “risk-on” sentiment but not yet translating into a comprehensive, long-term agreement.

Monetary Impact: Fed Rate Cut, Weaker USD, and Immediate Commodity Gains

Simultaneously, the US Federal Reserve decided to cut interest rates by approximately 25 basis points at the end of the month. This was a move aimed at supporting the economy amid risks from a government shutdown and shaky activity data. The Fed’s easing reduced short-term upward pressure on the US dollar, making dollar-denominated commodities (including metals) cheaper for buyers in other economies. Combined with the softening diplomatic sentiment, this was a “double boost“: increasing the purchasing power for risk assets and lowering the holding/borrowing costs for metal-consuming businesses. However, Fed officials themselves, including statements from Chairman Powell, still cautioned about uncertainty. Meaning the positive effect could be limited if the real economy proves genuinely weak.

Detailed Analysis of Metal Price Fluctuations During the Week

Copper — The “Barometer” Component and Supply Pressures Pushing Prices to New Peaks

Among all metals, copper reacted the strongest. Last week, copper futures on the London Metal Exchange (LME) hit a historical peak, briefly surpassing the $11,000/ton threshold in a few sessions, mainly due to the interplay of two factors: fears of supply disruptions at major mines and improved risk sentiment thanks to the Trump-Xi meeting. Analysts from ING and experts like CRU, Benchmark all pointed out that the copper supply chain is under pressure: several major mines reduced output due to incidents or maintenance, while commercial inventories in some warehouses are no longer as abundant as before. Consequently, even though current demand remains a big question (especially from China), the physical market is signaling a relative shortage, making any favorable news easily trigger a price surge.

Aluminum — Pulled by Sentiment but Restrained by Inventories

Aluminum benefited from the same macroeconomic sequence of events during the week: a weaker USD and better sentiment encouraged capital flow back into cyclical assets. However, the fundamental picture for aluminum offered less support for a strong breakthrough: aluminum inventories on the LME remain high (hundreds of thousands of tons), which reduces the pressure of shortage and curbs sustainable upward momentum. In other words, good news provided a price bounce but was insufficient to eliminate the burden of large inventories, and both producers and traders remain cautious in adjusting their stock levels.

Zinc, Lead, and Steel — Fluctuating with Construction and Energy Demand

Zinc, which is closely tied to construction activity, and lead, associated with battery production, saw increases but did not uniformly break out like copper. For iron and iron ore, the developments continued to reflect two opposing forces: domestic demand in China (still the decisive factor) has not shown immediate signs of explosion, while expectations of reduced trade tension could trigger inventory replenishment for infrastructure projects if Beijing takes specific stimulus actions. Ore prices traded around the $100+/ton mark during the week, but sustained upward momentum still requires confirmation from domestic construction activity and credit data.

Scrap Prices — Reflecting Scrap Supply and Recycling Demand

Scrap copper and aluminum prices in China (as reported by SMM/metal.com) remained at relatively high levels, reflecting both the raw material price and the actual scrap volume in the domestic market. When factories need alternative raw materials (due to cost or ore source), they increase scrap purchases, pushing scrap prices up—a trend the market demonstrated last week, particularly with copper scrap remaining pegged in the high range. This is an early indicator that the flow of recycled material is also contributing to tightening refined metal supply if demand escalates.

Expert Opinions — Reserved but Cautiously Optimistic

Reputable voices in the market were cautious about connecting “good news” with the long-term outlook. Reuters gathered analyst comments showing a general consensus: the Trump-Xi meeting was a politically significant step but insufficient to eliminate all risks; tariff reductions or concessions might only be temporary, and investors should wait for actual import, inventory, and production figures before believing that demand will strongly rebound. Saxo (Charu Chanana) described this as more of an “effort to reset the narrative” than a comprehensive ‘solution’; DBS emphasized that the market would react positively but needed to await Chinese data. On the supply front, Commerzbank and mining research organizations warned that technical issues and production cuts in Chile, Indonesia, and other major mining areas could be prolonged, providing a floor for copper prices to remain at higher levels.

Cross-Sector Effect: When Interest Rates and Diplomacy Converge

The combination of the Fed’s rate cut and improved US-China relations created a positive layer of sentiment: lower capital costs make capital-intensive projects (infrastructure, renewable energy, transport electrification) look more appealing, while the risk of trade disruption temporarily cooled. But two warnings are always present: first, Fed rate cuts often occur when growth shows signs of slowing—which is why the effect on commodities is two-sided; second, the diplomatic meeting might be a ‘pause’ rather than a long-term runway for stable trade. Therefore, investors should view the past week as a “trading opportunity” rather than a definite signal of a long-term recovery cycle.

Sentiment Is Leading, but “Material” Will Determine the Future

The past week was a classic illustration of a market in the age of instant news: diplomacy and monetary policy can rapidly change capital flows and short-term prices, but for a true “trend” to form, harmony between sentiment and material data is needed—inventory drawdowns, increased imports, and stable mine output. In the short term, metals like copper may maintain high prices due to supply risks, while aluminum and some other metals are prone to being dragged down if commercial inventories do not decrease. Risk managers, analysts, and traders must therefore look at both sides simultaneously: seizing opportunities but always being ready to protect portfolios if the demand story is not confirmed.

Source: Compiled from the internet.